HomeNewsNamibia's REDs struggle to make decent profits

Namibia’s REDs struggle to make decent profits

8 June 2012 – The Namibian reports that the country’s three regional electricity distributors (REDs) earned between on average four and Namibian 19 cents for every dollar of power they sold from 2007 to 2010.
Erongo Red was the only distributor whose operating margin of 19% met the benchmark of 17% set by the Electricity Control Board (ECB).

Erongo Red’s three-year average, however, was boosted by its operating margin of 54% in 2007/8. For both 2008/9 and 2009/10, the RED recorded an operating of 1%. Erongo Red said the slump in the margin was, among others, due to the company absorbing tariff increases to buffer its customers.
Nored had an average operating margin of 9% from 2007 to 2010, meaning the company earned nine Namibian cents out of every dollar of power it sold. It increased its margin from six to ten per cent from 2008/9 to 2009/10.
Cenored showed an average operating margin of 4% for the three years, recovering from -1% in 2007/8 to 7% the year after, before dipping to 6% in 2009/10.
In its latest annual report, the ECB said Nored’s financial performance has been consistently satisfactory, while Cenored and Erongo Red have improved their liquidity during the financial year ended June 2010. However, all three distributors had difficulties achieving their targets set for energy sold per employee, a matter which is of serious concern to the ECB, the regulator said.
The ECB has set a benchmark of between 2,400 and 9,600 kilowatt hours (kWh) per employee, which none of the distributors met. Erongo Red had a three-year average of 1,714 kWh, followed by Nored with 1,481 kWh and Cenored with 1,114 kWh. The ECB said it was putting measures into place to build capacity within the distribution areas and to improve efficiencies within this performance area.
Of the 10 performance benchmarks set by the ECB, Nored achieved eight, while Erongo Red and Cenored each met five. All three distributors met the technical benchmark for energy conversation efficiency set at between 89% and 97%. Erongo Red recorded an average of 91% from 2007 to 2010, followed by Nored with 84% and Cenored with 82%.
Only Nored met the commercial benchmark of 32 to 70 days for debtors to pay their accounts. Nored recorded an average of 60 days, while Erongo Red and Cenored had 85 and 77 days respectively. Nored also achieved the benchmark of between 25% and 40% of operating costs to sales, showing an average of 40%. Cenored recorded 42% and Erongo Red 18%. All three REDs were in line with the target of between 0.3% and 1.3% set for bad debts, all achieving an average 1%.